Genting Unit Borrows S$4.2 Billion to Build Casino

Feb. 11 (Bloomberg) -- Genting International Plc, a unit of Asia's biggest gaming operator by market value, borrowed as much as S$4.2 billion ($3 billion) to build a casino-resort in Singapore, more than double its outstanding debt.

The unit of Kuala Lumpur-based Genting Bhd. hired DBS Group Holdings Ltd., Oversea-Chinese Banking Corp., Sumitomo Mitsui Banking Corp., HSBC Holdings Plc and Royal Bank of Scotland Group Plc to arrange the borrowing, according to a statement sent to the Singapore exchange today.

``It is a big gamble,'' said Lim Kok Boon, Singapore-based chief investment officer at Fortis Private Banking, which manages $9.5 billion in assets. ``It is hard to tell how it is going to pan out for them, but clearly the casino project cannot fail as Genting International and the Singapore banks will be badly implicated.''

The company's funding will help the company compete with Las Vegas Sands Corp. as both race to open Singapore's first casino resort in about two years. The two gaming developments will have Singapore's casino market for at least 10 years before the government opens up the industry to further competition.

Las Vegas Sands

Genting International's funding will add to the S$2.17 billion raised in an August rights offer in August and S$450 million of convertible bonds sold in April to fund its project on Singapore's Sentosa island. The development will include Southeast Asia's first Universal Studios theme park.

The company's borrowing consists of a S$4 billion loan and S$192.5 million in a bank guarantee facility, the statement said. The company has $1.4 billion of outstanding debt, according to data compiled by Bloomberg.

Genting International declined to comment on the terms of the loan except that it's ``very happy'' with them.

``The credit facilities were raised as scheduled and planned for the development,'' Tan Hee Teck, chief executive officer of Resorts World at Sentosa Pte, said in an e-mailed reply to queries. ``Despite the challenging environment in the global credit markets, the banks have been very supportive.''

Las Vegas Sands, the world's largest casino operator by value, hired eight banks last year to arrange a loan of about S$5 billion for its Singapore gaming resort in the city's downtown.
`Next Phase'

The two casino loans top the S$1.56 billion offered to CapitaLand Ltd., Singapore's biggest developer, and Sun Hung Kai Properties Ltd., Hong Kong's largest, for their Orchard Turn project. The 2006 loan for the shopping mall and luxury home development in downtown Singapore was the largest for a Singapore property project since at least 1999, according to Bloomberg data.

The mall and gaming resorts are part of Singapore Prime Minister Lee Hsien Loong's effort to triple tourism revenue to S$30 billion by 2015. Lee ended a four-decade casino ban in 2005. The Singapore resorts aim to capture a slice of the regulated gambling market in the Asia-Pacific region, expected to expand 16 percent a year to $30.3 billion in 2011, according to PricewaterhouseCoopers LLP.

``The two integrated resorts are critical to Singapore's next phase of development, which is to rely less on external demand,'' Lim said in an interview.

The two facilities will help fund two-thirds of Genting International's casino project, which will cost S$6 billion, more than the S$5.2 billion the company estimated about a year earlier. The rest will be funded by last year's rights offer.

Shares Rise

Genting Bhd. runs casino-resorts in Malaysia. Genting International, which holds the parent company's overseas assets, also owns the U.K.'s biggest casino-operator, Stanley Leisure Plc.
Genting International rose 0.8 percent to 61 Singapore cents at the 5:05 p.m. close in Singapore, the first gain in four days.

Funding costs have gone up for Genting and its units as the credit and stock markets are roiled by losses of securities linked to U.S. subprime mortgages. The unit raised $1.4 billion in a rights offer at a 23 percent discount to its price on Aug. 14.

Investors demanded a spread of as much as 293 basis points more than the U.S. Treasuries of similar maturities on Jan. 22 for Genting Bhd.'s bonds. That's almost three times as much as what they asked for on Jan. 1 at 108 basis points more than the U.S. Treasuries. A basis point is 0.01 percentage point.

The unit's borrowing hasn't affected its parent's credit rating. Genting Bhd. has a credit rating of BBB+ from Standard & Poor's Corp., and Baa1 from Moody's Investors Service, the third- lowest investment grade.

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